What does first right of appropriation mean?
It means that when you pay money into your account, you have the right to tell the bank how you want that money to be used. Therefore you must inform them how you want the money to be used at the time of payment. If you don't give your bank instructions at the time of payment, they may decide how the money should be used.
For example, your wages or benefits or support payment from the council are due to be paid into your bank account and you need the money to cover your electricity and food bills. However, you have exceeded your agreed overdraft limit by a couple of hundred pounds and the bank wants to use any money coming in to reduce this.
How can you exercise your right?
It is preferable to send written instructions to your bank in case of any later dispute. It is also a good idea to request that the bank acknowledge your letter or you could send it via recorded delivery.
Example wording for a letter giving instructions to your bank.
Dear Sir / Madam,
Re: (Insert name, address and account number)
Funds are due to be paid into the above account.
These are: (List of all income payments due into account ie benefits and/or wages, with amounts and due date where known)
I write to exercise my first right of appropriation over these funds and all future payments from these sources into my account, ie these instructions are to be effected every month until further notice.
I instruct you to pay the following priority items for them: (List of all standing orders / direct debits / cheques that need to be paid; eg rent, mortgage, gas, electricity, water, childcare, house insurance; with the amount, what they are for and due dates if known).
I also instruct you to allow me to withdraw cash from these funds for food and other essential living expenses:
Cash withdrawal of £................................. per week.
I would be grateful if you could confirm receipt of this request in writing to me at the above address.
Yours sincerely
(Insert name)
This should ensure payment of the priority items. Where there is anything left over the bank will use it as it sees fit.
Where the same instructions are to be repeated every month, a sentence could be added to the letter stating 'these instructions are to be effected every month until further notice'.
Remember to keep copies of all correspondence with the bank.
Letter template to copy
How long will the bank accept this arrangement?
Although appropriation can be a useful tool in the short term, the bank is only likely to accept instructions for a short time before withdrawing banking facilities, so at some point you may need to open another bank account elsewhere.
Where you have a current account and a personal loan with the same bank, appropriation cannot be used to stop an internal transfer to the loan account.
What can I do if the bank won't accept instructions?
Pay the money into another account if you can.
If the money has been paid in and the bank won't return it, immediately start the bank's complaints procedure.